While ITC added nearly 39 new crorepati managers last year, HUL saw a marginal fall—to 123 from 129 in FY20, as per the latest disclosures by both companies in their annual reports. This was despite HUL merging GSK Consumer with itself, a move that added 3,500 employees to the workforce, including 21 managers drawing salaries of more than Rs 1 crore. To be sure, unlike pure-play consumer goods maker HUL, ITC is a conglomerate with multiple businesses including FMCG. These include cigarettes and cigars, packaged food products, personal care, stationery, safety matches and agarbattis. It also operates the country’s secondlargest hotel chain, the largest agri-business company in the private sector, and the largest paperboard maker. Each business of ITC has a CEO and a senior leadership team.
An industry executive said within the fast-moving consumer goods (FMCG) business, ITC has 96 managers earning over Rs 1 crore a year. This is less than HUL’s 123 executives who earn a Rs 1 crore plus annual salary.
The FMCG business contributed 65% to ITC’s gross revenue and over 90% to profit in FY21. The numbers of crorepati executives in ITC swelled due to lateral hires and having to be competitive in terms of compensation to key management personnel.
This happened after shareholder British American Tobacco (BAT) voted against ITC’s employee stock option scheme in 2018, said two industry executives. ITC restructured the salary structure in 2019, with the full effect of this being seen in FY21–the increased compensation of senior managers and the leadership, the executives said.
An ITC spokesperson said employee stock options had been granted to about 11% of managers in 2017; it’s down to less than 1%.
With the discontinuation of the employee stock option scheme, ITC has been restructuring compensation by transitioning value from equity-based, long-term incentives to salaries, including annual variable pay, which is linked to business performance, the person said. “While total compensation has changed in line with market trends, it is primarily the shift in the nature of compensation that is leading to a reporting of a higher number of managers earning a gross salary over a crore,” the person said.
As a result, the remuneration of ITC’s key management personnel increased by 51% in FY21, the company said in the report. They include chairman and managing director Sanjiv Puri, executive directors Nakul Anand, B Sumant and Rajiv Tandon, chief financial officer Supratim Dutta and company secretary RK Singhi. ITC attributed this increase to the impact of remuneration being revised and an increase in the number of senior executives. It said remunerations for the previous year have been recast to include contribution to approved pension funds.
Puri’s compensation went up by 47% to Rs 11.95 crore in FY21.
By contrast, HUL chairman Sanjiv Mehta’s remuneration fell 21% to Rs 15.36 crore in the last fiscal. While HUL has employee stock option plans for managers, it has seen a decline in executives drawing eight-figure remuneration from 169 in FY15. ITC had 23 in the same year, a sixfold jump in as many years.
The median remuneration of employees at ITC rose 16% in the last fiscal year despite the pandemic. This was among the steepest in the industry due to the compensation restructuring exercise, industry executives said. HUL, which saw a 2.6% increase in the median remuneration, didn’t respond to queries.
Seen as one of the best training grounds in the country, HUL has faced attrition at senior levels over the years.
Startups, ecommerce companies and those seeking to hold initial public offerings (IPOs) have been poaching top talent from HUL, said Abneesh Roy, senior vice president at Edelweiss Securities.
“In the case of ITC, the payout could have been better to compensate for employee stock option which will no longer be part of the remuneration,” he said.
HUL is often referred to as a CEO Factory, with more than 400 CEOs having emerged from the company. Various studies have shown that HUL remains the most preferred company overall among graduating MBA batches.
